HIGH COURT OF AUSTRALIA

PETERS v THE QUEEN

Toohey, Gaudron, McHugh, Gummow and Kirby JJ

29 May 1997; 2 February 1998 - Canberra

McHugh J

39 The questions in this appeal are whether dishonesty is an essential element of the crime of conspiracy to defraud and, if it is, whether the test of dishonesty is that described in R v Ghosh. ^[1] The appeal should be dismissed.

The factual background

40 In 1983, Larry James Spong and Franco Butera, a solicitor, were involved in unlawful drug trafficking and made significant profits. They agreed to conceal the profits from the Federal Commissioner of Taxation (the Commissioner). Under this agreement, Spong purchased five blocks of land in Essendon in false names. Butera acted for Spong in respect of the conveyancing of the five blocks. One of the blocks, containing a substantial residence, was purchased for $300,000 and was known as " Marlodge " . When Spong and Butera learned that they were under police surveillance, they arranged for all the conveyancing files to be transferred to the appellant, Philip Peters, who was also a solicitor.

41 In October 1983, the appellant acquired a shelf company, Jetoline Pty Ltd (Jetoline), for Spong. The appellant was a shareholder and director of Jetoline. Jetoline was registered as the purchaser of Marlodge. To enable Jetoline to purchase the property, a " mortgage " over the land in the sum of $180,000 was executed in favour of one Rosenberg which, to the appellant ' s knowledge, was an alias of Spong. In December 1983, a mortgage for $500,000 over all five blocks of land was executed in favour of Dial Financial Services Pty Ltd (Dial). The appellant knew that that mortgage was a sham, with no money being advanced under it.

42 Subsequently, the four blocks other than Marlodge were sold and successive withdrawals of caveat were prepared to enable Spong, in his relevant false identity, to give title to the purchasers. Moneys in partial discharge of the $500,000 mortgage were paid to Dial and then on to Spong. The appellant acted as the solicitor in each of the sales and knew that the moneys which Spong had provided would be repaid to Spong.

43 Much of the Crown case relied on the evidence of Butera and another conspirator named Coppens, an accountant, who had been involved in the sham transaction with Dial. Their evidence was critical because much of the documentary evidence was consistent with the appellant ' s claim that he was acting merely as a solicitor and had no knowledge that the money used by Spong was the product of drug trafficking. ^[2]

44 Butera claimed that, at a meeting on 23 December 1983 at the office of another solicitor, Campbell, the appellant and Coppens produced two mortgages, the appellant ' s mortgage being for $180,000 and Coppens ' mortgage for $500,000. Butera said that, while the parties were discussing the mortgages, which were executed in his presence, reference was made to the need to conceal the source of the purchase funds and concern was expressed as to whether the mortgage for $500,000 could be explained if later scrutinised. Coppens did not recall the appellant being present at that meeting and the appellant denied that he was present.

45 However, Coppens gave evidence that, at a meeting in the appellant ' s office before December 1983, the appellant devised a scheme to enable Spong to hide the source of the moneys from the Commissioner. Central to the scheme was the rotation of money through Dial. Coppens said that, from time to time thereafter, he had further discussions with the appellant regarding the scheme, which was completed by the execution of the mortgages in Campbell ' s office on 23 December 1983.

The history of the proceedings

46 The appellant was charged with conspiring with Spong, Butera, Coppens and another person " to defraud the Commonwealth, namely the Commissioner of Taxation, contrary to para 86(1)(e) of the Crimes Act 1914 (Cth) until 24 October 1984, and thereafter contrary to s 86A of the said Act " . ^[3]

47 The appellant was also charged with conspiring with Spong, Butera, Coppens and another person " to pervert the course of public justice, in that it was agreed to conceal the proceeds of LARRY JAMES SPONG ' s drug trafficking and thereby mislead and deflect police from investigating and prosecuting LARRY JAMES SPONG for such drug trafficking " . The jury subsequently acquitted the appellant of this charge.

48 Judge Hassett presided at the appellant ' s trial by jury in the County Court at Melbourne. In the course of his summing up, his Honour directed the jury on the charge of conspiracy to defraud as follows:

So what in summary are the elements of the charge in the first count? There are five elements really in the context of this case. First, an agreement to defraud which had as its outcome or incidental to its outcome, a depriving of the Commissioner of Taxation of income tax payable on moneys of Mr Spong or the risk of that deprivation.

Secondly, that the accused man was party to that agreement. Thirdly, that the accused man intended to defraud the Commissioner of Taxation. That is that he knew that the course of conduct agreed to be embarked upon involved the deprivation of the Commissioner of Taxation of that income tax or the risk of that deprivation. Four, that what was intended to be done was dishonest according to the standard of ordinary reasonable and honest people in the community and fifthly, the accused knew that what was intended was dishonest by those standards.

49 This was essentially the manner in which the learned trial judge put the prosecution case to the jury, although his Honour expanded on these directions at other stages of the summing up. The fourth and fifth elements of his Honour ' s direction follow the test of dishonesty set out in Ghosh.

50 The jury convicted the appellant on the charge of conspiracy to defraud. Hassett J sentenced the appellant to imprisonment for 18 months. The appellant appealed to the Court of Appeal of the Supreme Court of Victoria (Tadgell and Ormiston JJA, and Southwell AJA). The Court of Appeal dismissed the appeal, holding that the trial judge had correctly directed the jury on the test of dishonesty. ^[4]

The evolution of the crime of conspiracy

51 Having regard to the state of the authorities dealing with the issues raised in this case, it is necessary to trace the development of the law of conspiracy in some detail. A conspiracy to defraud is one of the heads of the crime of conspiracy, a crime which was described by Willes J in Mulcahy v The Queen, ^[5] as being an " agreement of two or more to do an unlawful act, or to do a lawful act by unlawful means. " ^[6] The second limb of this celebrated description, however, adds nothing: agreeing to use unlawful means necessarily involves agreeing to do an unlawful act.

52 The crime of conspiracy is commonly accepted as deriving from three statutes enacted in the reign of Edward I ^[7] although only the third statute made any attempt to define what constituted a conspiracy. That statute, the Ordinacio de Conspiratoribus 1305, ^[8] defined a conspiracy, inter alia, as an agreement, to combine falsely and maliciously to indict or acquit people. It is likely, however, that the notion of conspiracy as a breach of the law was known to the common law. The omission from the first two Edwardian statutes of any definition of a conspiracy suggests that the common lawyers of the day already had some understanding of the term. Indeed, some early writings " evidence a conception of conspiracy which had attained to some growth in the virgin soil of the common law quite independently of the Edwardian statutes " . ^[9] In any event, by the early 17th century the common law had developed to the extent that, independently of the statutes, it was an offence to conspire to abuse legal procedure. In the Poulterers ' case , ^[10] the Court of Star Chamber held, contrary to the early law, that mere agreement could constitute the offence.

53 Upon the abolition of the Star Chamber, the Court of Kings Bench " began to extend the offense so as to cover combinations to commit all crimes of whatsoever nature, misdemeanours as well as felonies " . ^[11] The offence quickly developed beyond that of interfering with the administration of justice. In the course of time, the common law developed various heads of criminal conspiracy such as conspiracy to pervert the course of justice, conspiracy to cheat and defraud, conspiracy to injure individuals other than by fraud, and conspiracy to commit a crime. ^[12] Until the House of Lords ' decision in Director of Public Prosecutions v Withers, ^[13] many lawyers assumed that the law of conspiracy was still capable of vigorous expansion to match changing circumstances. Criminal conspiracy as defined by Willes J in Mulcahy had an inherent potential for dynamic development, ^[14] a potential accentuated by the common law ' s acceptance at an early stage that the requirement of an unlawful act did not require a criminal act. ^[15] The description of conspiracy approved by the House of Lords in Mulcahy was therefore flexible enough to allow the courts to expand the crime in accordance with general notions of public policy. The decision of the House of Lords in Shaw v Director of Public Prosecutions, ^[16] dealing with conspiracy to corrupt public morals, is a well known illustration of the assumption that in this area of law the courts had the power to declare conduct criminal which had not previously been regarded as criminal. In Withers, however, the House of Lords made it clear that, although there is only one offence of conspiracy which for convenience is categorised into separate heads, ^[17] the courts cannot develop the law of conspiracy by adding new heads to those already recognised by the law. It is for Parliament to expand the offence by statute, if it so desires.

54 It does not follow, however, that because the courts can no longer develop new heads of conspiracy, they are also restrained from formulating or developing principles that apply to the recognised heads of conspiracy. On the contrary, because there is only one offence of conspiracy, it seems imperative that, so far as possible, the actus reus and mens rea of each of the recognised heads should be governed by the same principles. A real question arises, however, whether dividing the elements of conspiracy into an actus reus and a mens rea serves any useful purpose. ^[18] In his treatise on the law of criminal conspiracy, Goode contends that: ^[19] " the concept of actus reus is an elusive one, particularly in the area of criminal conspiracy; so much so, in fact, that it may well be possible to say that the crime has no distinguishing mental and physical elements. " In R v Churchill and Walton ^[20] the accused was charged with conspiracy to commit an offence against a statute, the offence being one of strict liability. Viscount Dilhorne said ^[21] that " mens rea is only an essential ingredient in conspiracy in so far as there must be an intention to be a party to an agreement to do an unlawful act " and that in " cases of this kind, it is desirable to avoid the use of the phrase ' mens rea ' … and to concentrate on the terms or effect of the agreement " .

55 One of the difficulties in dividing the offence of conspiracy into the traditional elements of an actus reus and a mens rea is that the agreement of the parties to pursue a common and unlawful design is traditionally regarded as the actus reus of the offence. Yet such an agreement, assuming it to be voluntary, necessarily includes a mental element. ^[22] At the very least, there must be an intention to enter into the agreement, ^[23] and the present state of the authorities suggests that there can be no conspiratorial agreement unless the accused and his or her co-conspirators also intend that the common design should be carried out.

56 Because intention is involved in the actus reus of the offence, authority in Canada, ^[24] England ^[25] and the United States ^[26] holds that two persons cannot be guilty of conspiracy unless both intend to make an agreement to do an unlawful act and both intend to carry it out. Thus, in R v O ' Brien ^[27] the Supreme Court of Canada held that it was open to a jury to find that there was no conspiracy where two persons had agreed to kidnap another person but one of them, Tulley, swore that he never had any intention of carrying it out. A majority of the court held that the trial judge had misdirected the jury by instructing them " that the offence was complete, if, in point of fact, the accused and Tulley did make the agreement which is charged against him, even though Tulley never at any time had any intention of carrying the agreement into effect " (Emphasis omitted). Rand J said: ^[28]

[A] conspiracy requires an actual intention in both parties at the moment of exchanging the words of agreement to participate in the act proposed; mere words purporting agreement without an assenting mind to the act proposed are not sufficient.

This statement accords with the summing up of Erle J in R v Dowling ^[29] where his Lordship instructed the jury that a witness " was not an accomplice, for he did not enter the conspiracy with the mind of a co-conspirator, but with the intention of betraying it to the police, with whom he was in communication " .

57 In R v O ' Brien, Taschereau J said: ^[30]

I think there has been some confusion as to the element of intention which is necessary to constitute the offence. It is, of course, essential that the conspirators have the intention to agree , and this agreement must be complete. There must also be a common design to do something unlawful, or something lawful by illegal means. Although it is not necessary that there should be an overt act in furtherance of the conspiracy, to complete the crime, I have no doubt that there must exist an intention to put the common design into effect . A common design necessarily involves an intention. Both are synonymous. The intention cannot be anything else but the will to attain the object of the agreement. (Emphasis in original.)

58 In R v O ' Brien, the majority of the Supreme Court regarded the lack of any common intention to carry out the kidnapping as preventing the criminal agreement from arising, notwithstanding that both Tulley and the accused had agreed to kidnap the victim. The accused clearly intended to make an agreement to kidnap and also intended to carry it out. The elements of the offence were made out in so far as they concerned the accused ' s conduct and state of mind. However, the Supreme Court concluded that it was open to the jury to acquit the accused if Tulley never intended to carry out the kidnapping. Arguably, this conclusion means that Tulley ' s lack of intention went not merely to his mens rea but also to the making of the criminal agreement (ie the actus reus of the offence with which both Tulley and the accused were charged). However, the conclusion is also explicable on the related ground that there must be at least two conspirators and, if Tulley was not guilty of conspiracy, neither was the accused.

59 In R v Thomson, ^[31] there was evidence on which the jury could conclude that the accused had led his alleged co-conspirators to believe that he was agreeing with them to carry out an unlawful purpose when he had no intention of assisting in carrying out that purpose. Lawton J seems to have taken the view that the mental reservation of the accused prevented any criminal agreement on his part from coming into existence. His Lordship, after expressing his agreement with the view of the majority of the Supreme Court of Canada went on to say: ^[32]

For the purposes of the law of contract, the words or conduct by which a man manifests his assent are binding on him and the law does not allow him to say that his mind did not go with his conduct. The criminal law, however, is concerned with punishing wrongdoing; the essential element in any crime, other than in the limited class of absolute offences, is a guilty mind. Evidence that the accused person acted and spoke as if he was making and had made an agreement may provide cogent evidence of a guilty mind; but it is only evidence and can be rebutted by other evidence.

It follows, in my judgment, that in the crime of conspiracy there must be the element of a guilty mind.

His Lordship ' s agreement with the majority of the Supreme Court in R v O ' Brien and his reference to the law of contract suggest that he saw the lack of intention to carry out the agreement as preventing any criminal agreement arising, notwithstanding his reference to " a guilty mind " .

60 In R v Gemmell, ^[33] the court of Appeal of New Zealand held that a trial judge had wrongly directed the jury that the accused was guilty of conspiracy to commit an armed robbery if he agreed to the robbery of a post office even if he did not know that the other conspirators intended to use a gun. McMullin J, delivering the judgment of the court, said: ^[34]

It is of the essence of a conspiratorial agreement that there must be not only an intention to agree but also a common design to commit some offence, that is, to put the design into effect. The need for the existence of these two elements, the mens rea and actus reus , as they are sometimes called, may be more difficult to distinguish in conspiracy than in other crimes.

After referring to the judgment of Taschereau J in R v O ' Brien and noting the decision in Thomson, McMullin J said: ^[35]

To return to the traditional nomenclature of the criminal law, the mens rea is the intention of the conspirator to achieve the common design and his mind must go with the apparent manifestation of his consent. The actus reus of the offence of conspiracy is the agreement which has a common design. The actus reus does not exist in mere formulation of an intention in the minds of two or more persons to commit a crime; there must be an agreement into which that intention is translated.

61 The reference to mens rea in this passage shows how difficult it is to separate the elements of actus reus and mens rea in conspiracy. Although the language used is unclear, his Honour appears to be saying that no criminal agreement or actus reus can exist unless, separately considered, both parties intend to do an unlawful act in prosecution of a common design and both parties make an agreement together to carry out that common design.

62 In principle, it seems correct to conclude that there is no criminal conspiracy between two people unless, at the time of making the alleged agreement, both parties intend to carry it out. This is because " the long established rule that conspiracy requires at least two guilty parties means that as against any particular accused the actus reus will include the existence of the requisite ' intent ' on the part of at least one other person who has manifested agreement " . ^[36] If one person has not in fact conspired to do an unlawful act, it is impossible to hold that the only other party to the alleged conspiracy has nevertheless conspired to do that act. As Deane J pointed out in Gerakiteys v The Queen: ^[37] " [t]here must be at least two parties to a conspiracy. " The required intention cannot differ as between the alleged conspirators, if an intention to do an unlawful act is not required of one party, the law cannot require it of the other party. And as Professor Sir John Smith points out ^[38] a " conspiracy which no one intends to carry out is an absurdity, if not an impossibility " . In an illuminating article, ^[39] Dean Harno persuasively argued that Willes J ' s statement in Mulcahy ^[40] that a " conspiracy consists not merely in the intention of two or more, but in the agreement of two or more to do an unlawful act " , should perhaps have emphasised that " conspiracy consists not merely in the agreement of two or more but in their intention " .

63 Nothing in R v Darby ^[41] is inconsistent with the proposition that a person cannot be guilty of criminal conspiracy if the only other party to the alleged conspiracy never intended to carry out the agreement. In Darby, this court held that one person could be convicted of criminal conspiracy even though the other alleged party to the conspiracy had been or was acquitted of the charge " unless in all the circumstances of the case his conviction is inconsistent with the acquittal of the other person " . ^[42] This conclusion is plainly correct because, among other reasons, evidence which is admissible against one accused, for example, a confession, may not be admissible against the other accused. Where, however, one of the two parties never intended to carry out the alleged agreement to do an unlawful act, the conviction of the other is necessarily inconsistent with the conclusion that the other party is not a conspirator.

64 The decisions in O ' Brien and Thomson are consistent with the view that the reason why the law punishes conspiracies is not so much because parties have made an agreement or have evil minds but because they both intend to achieve some further act that is detrimental to the welfare of society. It is the likelihood that their common intention will be translated into socially undesirable action that prompts the State to intervene. If one of the two parties has no intention of committing the socially harmful act, it lessens the chance that the act will occur. It merely lessens the chance, however, rather than eliminates it altogether. In many cases the encouragement flowing from the agreement may cause the other party to carry out that act. In my view, Dean Harno was right when he said: ^[43]

Conspiracy is an inchoate crime for which the essential act is slight. It involves an intent to commit a further act. It is the commission of that act which the state desires to prevent, and it is with the intent to commit that act that the state is concerned. The essence of the crime thus lies in the intent.

65 The decision of this court in Gerakiteys ^[44] also emphasises that the conspirators must have a common intention to achieve the same unlawful object. The court held that the accused could not be guilty of conspiring with nine other persons to defraud a number of insurance companies because the evidence did not establish that the accused and the other persons all had a common purpose of defrauding those companies. Rather, the evidence established no more than that the accused and one other person had a common purpose of defrauding a particular company.

66 It would seem to follow from Gerakiteys that a person must intend to achieve the carrying out of the unlawful act and that it is not sufficient proof of a criminal conspiracy that he or she realised that the probable consequences of his or her conduct might result in the performance of the unlawful act. Indeed, the editor of Howard ' s Criminal Law ^[45] declares that the effect of Gerakiteys is that " reckless assistance or encouragement does not amount to a conspiratorial agreement " . Similarly, Dean Harno contended that ^[46] " [c]riminal conspiracy involves a specific intent to commit a particular act " ; and Professor Sir John Smith says that ^[47] " [r]ecklessness as to circumstances of the actus reus is not a sufficient mens rea on a charge of conspiracy to commit a crime even where it is a sufficient mens rea for the crime itself " . More importantly, Wilson, Deane and Dawson JJ took the same view in an obiter comment in Giorgianni v The Queen. ^[48] Their Honours said: ^[49]

For the purposes of many offences it may be true to say that if an act is done with foresight of its probable consequences, there is sufficient intent in law even if such intent may more properly be described as a form of recklessness. There are, however, offences in which it is not possible to speak of recklessness as constituting a sufficient intent. Attempt is one and conspiracy is another. (Emphasis added.)

67 One difficult area of intention in cases of conspiracy to injure or defraud arises where relevant harm is suffered only by a person whose person or interests were not the object of the agreement. In principle, it is clear that the court cannot attribute a constructive intention to the defendants. Consequently, in Attorney-General ' s Reference (No 1 of 1982) ^[50] the English Court of Appeal held that the defendants could not be indicted in England where they had agreed to defraud persons in Lebanon by selling bottles of whisky on which they had fraudulently placed the labels of an English company (the X company). For jurisdictional reasons, ^[51] they could not be indicted for conspiracy to defraud the purchasers, and, since harm to the X company was not the object of their agreement, the Court of Appeal held that had not conspired to defraud that company. Delivering the judgment of the court, Lord Lane CJ said: ^[52]

It may well be that if the plan had been carried out, some damage could have resulted to the X company. But that would have been a side effect or incidental consequence of the conspiracy, and not its object. There may be many conspiracies aimed at particular victims which in their execution result in loss or damage to third parties. It would be contrary to principle, as well as being impracticable for the courts to attribute to defendants constructive intentions to defraud third parties based on what the defendants should have foreseen as probable or possible consequences. In each case to determine the object of the conspiracy, the court must see what the defendants actually agreed to do.

68 But this statement, although correct so far as it goes, overlooks the fact that a jury could find that the X company must inevitably have suffered loss or been prejudiced ^[53] by the conspiracy and that the defendants knew it. It is no misuse of language in that context to say that the defendants intended to cause damage to the X company. At all events, a jury could find from those facts that the defendants intended to cause harm to the X company. No doubt when a person intends to do something, ordinarily he or she acts in order to bring about the occurrence of that thing. But a person may intend to do something even though it is the last thing that he or she wishes to bring about. ^[54] Intention in this context is broader than a person ' s inclination to act to achieve a result that he or she believes is desirable. If a person does something that is virtually certain to result in another event occurring and knows that that event is certain or virtually certain to occur, for legal purposes at least he or she intends it to occur. ^[55] In R v Moloney ^[56] and R v Hancock and Shankland, ^[57] however, the House of Lords held that foresight of a consequence, even foresight that the consequence was virtually certain, was merely evidence of intention. But if this is so, a jury would be bound to acquit a person accused of murder if the jurors believed that the accused had not committed the fatal act in order to bring about the death of the deceased even though the accused knew that death was the certain result of his or her actions.

69 For present purposes, it is sufficient to say that, although it is wrong to impute a constructive intention to defendants charged with conspiracy, they may have intended to injure or defraud a person even though that person or his or her interests were not the object of the conspiracy. This seems to have been accepted by the House of Lords in R v Cooke ^[58] where, surprisingly, no reference was made to Attorney-General ' s Reference (No 1 of 1982) . ^[59] In Cooke, the House held that employees of the British Rail Board could properly be convicted at common law of conspiring to defraud the Board " by making sales of food and drink not the property of the … Board to customers of the … Board and by failing to account to the … Board for the proceeds of sale thereof " . ^[60] The accused, who were crew members of a train with a refreshment service, had brought their own tea and coffee powder and cheese and beefburgers onto the train and sold them to passengers.

Conspiracy to defraud

70 Conspiracy to defraud is a particular application of the statement of Willes J in Mulcahy ^[61] that a conspiracy consists of " the agreement of two or more to do an unlawful act, or to do a lawful act by unlawful means " . The criminal law of conspiracy began to expand " during the reign of Edward III … accelerated in the time of Elizabeth and James I, and had made its most important progress by the end of the reign of George III " . ^[62] Indeed, it was not until around the time of George III (1760-1820) that conspiracy to defraud became recognised as an independent head of criminal conspiracy. Cheating the public had long been recognised as an indictable offence but, until R v Wheatley, ^[63] the fact that more than one person was involved in the cheating seems to have been merely a matter of aggravation, ^[64] not liability. In Wheatley, Mansfield LCJ said ^[65] that " [a]ll indictable cheats are where the public in general may be injured; as by using false weights, measures, or tokens; - or where there is a conspiracy " . The view that a conspiracy to cheat was indictable was accepted by Kenyon LCJ in R v Lara . ^[66] The final step in the development of this branch of the law was taken in R v Gill and Henry ^[67] where the court of Kings Bench upheld an indictment for conspiracy to cheat and defraud although the means of the cheating were not specified. Abbott CJ said: ^[68]

It is objected that the particular means and devices are not stated. It is, however, possible to conceive that persons might meet together, and might determine and resolve that they would, by some trick and device, cheat and defraud another, without having at that time fixed and settled what the particular means and devices should be. Such a meeting and resolution would nevertheless constitute an offence.

Henceforth, a mere agreement to cheat and defraud without any overt acts implementing the conspiracy was sufficient.

71 Throughout the 18th and 19th centuries, most reported cases upholding an indictment for a conspiracy to cheat and defraud involved deception by means of false pretences. ^[69] Nevertheless, the cases showed that any combination to cause financial prejudice by dishonesty would suffice to found an indictment or information. Thus, in R v Hilbers ^[70] the Court of Kings Bench refused to set aside a criminal information charging the defendants with conspiracy to raise the price of oil by making fictitious sales. In R v Hall, ^[71] the court held that an indictment would lie for the defrauding of creditors by disposing of goods after an act of bankruptcy. And in R v Absolon and Clark ^[72] the court held that an indictment would lie for conspiracy to cheat and defraud a railway company where the defendants had purchased " not transferable " tickets for the purpose of selling them. Moreover, in Levi v Levi, ^[73] a civil action for slander for imputing a felony, Gurney B directed the jury that if, pursuant to an agreement, a group of people go to an auction with the shared intention that only one of them would bid for any particular article, and that they would later sell the articles that they had bought and divide the profits, they could be tried for a conspiracy to defraud the owners of the goods.

72 These cases show that deception was not an essential element of a conspiracy to defraud. It was sufficient if the defendants agreed to use dishonest means to achieve their object. However, a conspiracy to defraud involves more than an agreement to use dishonest means to achieve some object. As Lord Radcliffe pointed out in Welham v Director of Public Prosecutions: ^[74]

[D]efrauding involves doing something to someone. Although in the nature of things it is almost invariably associated with the obtaining of an advantage for the person who commits the fraud, it is the effect upon the person who is the object of the fraud that ultimately determines its meaning.

His Lordship went on to say: ^[75]

[P]opular speech does not give, and I do not think ever has given, any sure guide as to the limits of what is meant by " to defraud. " It may mean to cheat someone. It may mean to practise a fraud upon someone. It may mean to deprive someone by deceit of something which is regarded as belonging to him or, though not belonging to him, as due to him or his right. It passes easily into metaphor, as does so much of the English natural speech. Murray ' s New English Dictionary instances such usages as defrauding a man of his due praise or his hopes. Rudyard Kipling in the First World War wrote of our " angry and defrauded young " . There is nothing in any of this that suggests that to defraud is in ordinary speech confined to the idea of depriving a man by deceit of some economic advantage or inflicting upon him some economic loss.

Has the law ever so confined it? In my opinion there is no warrant for saying that it has. What it has looked for in considering the effect of cheating upon another person and so in defining the criminal intent is the prejudice of that person: what Blackstone ^[76] called ' to the prejudice of another man ' s right ' .

73 Although most cases of conspiracy to defraud involve an agreement to use dishonest means which has the effect of inflicting economic loss on a third party, the infliction of such loss is not an essential element of the offence. It is sufficient that the conspirators intended to obtain some advantage for themselves by putting another person ' s property at risk ^[77] or depriving another person of a lawful opportunity to obtain or protect property. ^[78] It is also well established that a conspiracy to defraud may be established if the defendants agree to deceive a person into acting or refraining from acting contrary to his or her public duty. ^[79]

74 Thus, in most cases, a conspiracy to defraud arises when two or more persons agree to use dishonest means with the intention of obtaining, making use of or prejudicing another person ' s economic right or interest or inducing another person to act or refrain from acting to his or her economic detriment. Exceptionally, a conspiracy to defraud will also arise when two or more persons agree to use dishonest means to induce a third person to act or refrain from acting in contravention of the third person ' s public duty. In some cases, it may be sufficient that the object of the agreement to use dishonest means concerns a non-economic right or interest of a person such as private reputation or personal status. But in the vast majority of cases, conspiracies to defraud concern rights or interests having an economic value.

The mental element in conspiracy to defraud

75 In so far as it is meaningful to speak of mens rea in the crime of conspiracy to defraud, mens rea means the intention to prejudice the interests of a third person by the use of means that are dishonest. Since the decision of the House of Lords in R v Scott, ^[80] however, the notion has grown up ^[81] that dishonesty is a separate element of the crime of conspiracy to defraud and that the prosecution must prove that the accused persons knew that they were acting dishonestly. In Scott, the issue before the House of Lords was whether the offence of conspiracy to defraud could be made out in the absence of proof of deception. Their Lordships held that it could. They upheld a conviction for the offence where the appellant had agreed with employees of cinemas to pay them in return for lending him films which he could copy and sell for commercial distribution. In the course of his speech Viscount Dilhorne said: ^[82]

If, as I think … " fraudulently " means " dishonestly, " then " to defraud " ordinarily means … to deprive a person dishonestly of something which is his or something to which he is or would or might but for the perpetration of the fraud be entitled.

76 Later in his speech, Viscount Dilhorne said: ^[83]

[I]t is clearly the law that an agreement by two or more by dishonesty to deprive a person of something which is his or to which he is or would be or might be entitled and an agreement by two or more by dishonesty to injure some proprietary right of his, suffices to constitute the offence of conspiracy to defraud.

77 These statements were descriptive and not intended to be definitive of the elements of the offence of conspiracy to defraud. They provide no support for the view that dishonesty as such is an element of the offence. Still less do they provide any support for the view that the offence is not proved unless an accused person knows that he was acting in a way that ordinary people would consider dishonest. If that was so, it would follow that, if one of two alleged conspirators did not know that what he was doing was dishonest, both would have to be acquitted because there must be at least two conspirators.

78 Yet in Ghosh, ^[84] the English Court of Appeal took Viscount Dilhorne ' s statements in Scott as meaning that proof of subjective dishonesty was essential to the proof of both theft under the Theft Act 1968 (UK) and the common law offence of conspiracy to defraud and that the tests were interchangeable. ^[85] The test of dishonesty formulated in Ghosh has been applied in Australia in numerous cases concerned with conspiracy to defraud. ^[86] The authors of Archbold ^[87] seem to have been voices in the wilderness in robustly maintaining the view that it is " superfluous " to direct a jury as to dishonesty. In my opinion, however, the authors of Archbold are right. A successful prosecution for conspiracy to defraud does not require proof that the accused knew that he or she was acting dishonestly either in a Ghosh sense or a wholly subjective sense.

79 Proof of a conscious design on the part of the conspirators to use dishonest means is essential to proving the charge. But this does not mean that the defendants must know that they were acting dishonestly, whether dishonesty is judged by their standards or their knowledge of the standards of ordinary people. In Churchill ^[88] Viscount Dilhorne, speaking for the House of Lords, said that " mens rea is only an essential ingredient in conspiracy in so far as there must be an intention to be a party to an agreement to do an unlawful act " . Similarly, in Meissner v The Queen, ^[89] a case concerned with conspiracy to pervert the course of justice, Brennan and Toohey JJ and I pointed out that the requisite mental element is satisfied for the purpose of the offence if the accused intends to do acts that have the effect of perverting the course of justice even if he or she has never heard of the expression " perverting the course of justice " . If two persons, intending to use means that are dishonest, agree to use those means to obtain an advantage for themselves by putting another person ' s property at risk, they agree to do an unlawful act. Similarly, if intending to use means that are dishonest they agree to deprive a person of the opportunity to obtain or protect property by those means, they agree to do an unlawful act. In both cases, they are guilty of conspiracy whether or not they knew that those means were dishonest.

80 In the paradigm case of conspiracy to defraud, an agreement to induce persons to buy property by making fraudulent misrepresentations, the charge is made out upon proof that the accused agreed to induce persons to part with their property by the making of statements (by one or more of them or by others) which the accused knew were untrue. ^[90] Whether or not the accused believed that what they were doing was honest is irrelevant to the charge. Obtaining property by statements which are known to be untrue is the employment of dishonest means. If the accused agree to obtain property by such means, they are guilty of the offence of conspiracy to defraud and the trial judge is entitled and, indeed, bound to direct the jurors to this effect. That is because the accused have the intention to do acts which for the purposes of the crime of conspiracy are unlawful acts and have agreed to do them. Similarly, in Scott a conspiracy to defraud the owners of the copyright and distribution rights in the films was made out upon proof that without the consent of the owners the accused had agreed to take and copy films for commercial distribution. None of the Law Lords suggested that the guilt of Scott depended on whether he knew that he was acting dishonestly or whether a jury could find that the taking and copying of the films was dishonest. The Law Lords themselves characterised the taking and copying of the films as dishonest means.

81 The point of law certified by the Court of Appeal for the decision of the House of Lords in Scott ^[91] asked:

Whether, on a charge of conspiracy to defraud, the Crown must establish an agreement to deprive the owners of their property by deception; or whether it is sufficient to prove an agreement to prejudice the rights of another or others without lawful justification and in circumstances of dishonesty.

82 Viscount Dilhorne said: ^[92]

Reverting to the questions certified by the Court of Appeal, the answer to the first question is in my opinion in the negative. I am not very happy about the way in which the second question is phrased although the word " prejudice " has been not infrequently used in this connection. If by " prejudice " is meant " injure " , then I think the answer to that question is yes, for in my opinion it is clearly the law that an agreement by two or more by dishonesty to deprive a person of something which is his or to which he is or would be or might be entitled and an agreement by two or more by dishonesty to injure some proprietary right of his, suffices to constitute the offence of conspiracy to defraud.

83 It is for the trial judge to determine whether the facts relied upon by the prosecution, if proved, establish an agreement to use dishonest means sufficient to constitute a conspiracy to defraud, that is to say whether those facts show an agreement to do an unlawful act for the purpose of the offence of conspiracy to defraud. ^[93] In the context of conspiracy to defraud the prejudicing of another person ' s interests by dishonest means is an " unlawful act " of the kind described in Mulcahy . In determining whether, as a matter of law, the alleged facts show an agreement to use dishonest means to prejudice the interests of a third party, questions of intention, knowledge and claims of right on the part of the defendants will ordinarily be crucial because the common state of mind of the defendants in relation to various acts or omissions will usually be decisive in determining whether the object of the conspiracy was an unlawful act or whether its implementation involved the use of unlawful means. It is then for the jury to determine whether the prosecution has proved the facts that the trial judge has held, as a matter of law, constitute dishonest means for the purpose of a conspiracy to defraud. ^[94]

84 In most cases of conspiracy to defraud, to prove dishonest means the Crown will have to establish that the defendants intended to prejudice another person ' s right or interest or performance of public duty by:

• making or taking advantage of representations or promises which they knew were false or would not be carried out;

• concealing facts which they had a duty to disclose; or

• engaging in conduct which they had no right to engage in.

In the latter class of case, it will often be sufficient for the Crown to prove that the defendants used dishonest means merely by the Crown showing that the defendants intended to engage in a particular form of wrongful conduct. Proof of an agreement by the defendants to engage in conduct that involves ^[95] a breach of duty, trust or confidence or by which an unconscionable advantage is to be taken of another will usually be sufficient evidence of dishonest means unless the defendants raise an actual or supposed claim of right or allege that they acted innocently or negligently. In Scott, for example, the conspiracy to defraud was made out when the employees without the consent of the owners agreed with the appellant that for reward the employees would give the films to the appellant so that he could copy them for commercial distribution. If the appellant had claimed that he had or believed that he had some contractual or other right to receive and copy the films, the offence would not have been made out unless the prosecution negatived the claim beyond reasonable doubt. In Adams v The Queen, ^[96] the Privy Council held that conspiracy to defraud was made out where directors of a corporation (Equiticorp) had failed to disclose that they had bought shares in a company owned by Equiticorp and later sold them back to that company at a substantial profit. By concealing their conflict of interest, they had conspired by dishonest means to deprive Equiticorp of the secret profits they had made. Similarly, company directors who agree to divert the funds of the company for their private purposes will be guilty of conspiracy to defraud unless they raise some claim of right to do what they did and the Crown fails to negative that claim beyond reasonable doubt.

85 It follows that the mental element of the crime of conspiracy to defraud is the intention to prejudice the interests of a third person by the use of means that are dishonest. As Lord Diplock pointed out in Scott: ^[97] " The intended means by which the purpose is to be achieved must be dishonest. They need not involve fraudulent misrepresentation such as is needed to constitute the civil tort of deceit. Dishonesty of any kind is enough. " Inevitably, the question of whether those means are dishonest will ordinarily involve other questions concerning the state of mind of the defendants at the time of the agreement, the intention, knowledge or state of belief that is to accompany their acts or omissions. ^[98] Thus, if the charge is conspiracy to defraud a company by investing its funds in high risk ventures, the beliefs and knowledge of the accused as to the risk involved will be critical in determining whether they used dishonest means. Whether the evidence of their intended means, if proved, constitutes dishonest means for the purpose of the charge of conspiracy to defraud is a question for the trial judge. The beliefs of the accused persons as to whether they thought they were acting honestly are irrelevant. ^[99]

86 Cases involving statutes which make dishonesty an element of an offence are in a different category. " Dishonesty " is an ordinary English word. The meaning and application of ordinary English words in a statute are questions of fact. In a criminal trial involving a statute that makes " dishonesty " an element of an offence, it is for the jury to determine whether the conduct of the accused was dishonest, although in some cases the statutory context may make it imperative for the judge to direct the jury on the meaning of the term. ^[100] However, in conspiracy to defraud at common law or under a statute which does not make dishonesty an element of the offence (such as ss 86(1)(e) and 86A of the Crimes Act 1914 (Cth)), it is for the judge to determine whether the facts alleged constitute the offence of conspiracy to defraud. In determining that issue, a critical question for the judge will be whether the means allegedly intended to be used can be characterised as dishonest so as to make the agreement a conspiracy to defraud for the purpose of that Act or the common law. It is in this way that the elements of dishonesty play a part in the crime of conspiracy to defraud. It is not for juries by defining dishonesty to hold what is or is not a conspiracy to defraud. It is the judge ' s task to determine whether the facts relied on by the prosecution, or some version of them, constitute a conspiracy to defraud. If the judge finds that they do, it is the jury ' s task to determine whether the relevant facts have been proved so as to make the accused guilty of the offence.

The trial judge ' s directions were unduly favourable to the appellant

87 In the present case, the appellant was charged under ss 86(1)(d) and 86A of the Crimes Act 1914 (Cth) which, like the common law offence of conspiracy, do not require proof of dishonesty as an element of the offence. However, the trial judge directed the jury in accordance with Ghosh. That direction was unduly favourable to the appellant because it required the jury to be satisfied that the appellant must have realised that what he was doing was dishonest by the standards of ordinary and reasonable people.

88 The case for the prosecution was that the appellant agreed with Spong and others to conceal the correct amount of Spong ' s income by sham mortgage transactions and that they intended by those means to deprive the Federal Commissioner of Taxation (the Commissioner) of the tax payable on that income or alternatively to make it difficult for the Commissioner to determine the taxable income of Spong. Proof of those facts constituted a conspiracy to defraud the Commonwealth, and the trial judge was bound to tell the jury that the offence was made out if those facts were proved. A direction in the following form would have been appropriate:

The basis of the charge that the accused conspired to defraud the Commissioner is the claim that he agreed with Spong, Butera and Coppens to defraud the Commissioner of income tax that was or might be payable on the monies received by Spong. To establish the offence, the Crown must prove three matters. First, that the accused, Spong, Butera and Coppens knew that Spong had received moneys which they believed were or might be taxable income. Second, that they agreed and intended to use sham mortgage transactions in order to conceal from the Commissioner that Spong had received those moneys. Third, in entering into the agreement they intended to prevent the Commissioner from collecting the tax that was or might be payable on those moneys or alternatively they intended to make it more difficult for the Commissioner to determine the taxable income of Spong.

The Crown does not have to prove that all of the alleged conspirators entered into the agreement. But the Crown does have to prove that at least one of them entered into an agreement with the accused with the intention to use sham mortgage transactions to conceal the fact that Spong had received these monies and that that person and the accused knew or believed those moneys might be taxable income. The Crown must also prove that that person and the accused intended to prevent the Commissioner from collecting the income tax that was or might be payable on those monies or alternatively intended to make it more difficult for the Commissioner to determine the taxable income of Spong.

89 The learned trial judge did not direct the jury in terms in accordance with these suggested directions, but with one exception he did so in substance. As I have pointed out, his Honour instructed the jury that there were five elements which the Crown had to prove:

First, an agreement to defraud which had as its outcome or incidental to its outcome, a depriving of the Commissioner of Taxation of income tax payable on monies of Mr Spong or the risk of that deprivation.

Secondly, that the accused man was party to that agreement. Thirdly, that the accused man intended to defraud the Commissioner of Taxation. That is that he knew that the course of conduct agreed to be embarked upon involved the deprivation of the Commissioner of Taxation of that income tax or the risk of that deprivation. Four, that what was intended to be done was dishonest according to the standard of ordinary reasonable and honest people in the community and fifthly, the accused knew that what was intended was dishonest by those standards.

90 In my view, given that the statutory provisions under which the appellant was charged did not require proof of dishonesty as an element of the offence, the trial judge should not have directed the jury that the prosecution had to prove the fourth and fifth elements. His Honour should have directed the jury that they could find the accused guilty if the prosecution has established beyond reasonable doubt that the accused and at least one other of the parties to the alleged agreement intended to deprive the Commissioner of the income tax payable on moneys of Mr Spong or to prejudice the collection of that income tax by using sham mortgage transactions to conceal Spong ' s ownership of the money. On the undisputed facts of the case and the jury ' s finding that there was a conspiracy, it is plain that Butera, Coppens and Spong or one or more of them were parties to an agreement with the appellant and had the relevant knowledge, belief and intention.

91 Instructing the jury in accordance with Ghosh therefore constituted no miscarriage of justice. Indeed, by requiring the prosecution to prove the fourth and fifth of the five elements to which his Honour referred, the judge ' s charge to the jury was unduly favourable to the appellant.

92 The appeal must be dismissed.